Dividends are a portion of the income that a company distributes among its shareholders when it earns profits. The divided policy of a company is seen as a proof to its confidence in future growth and sustainability of the business. Thus, a good record of dividends value is a sign of reliability that the stock would give good returns in the future.
Hence, investing in dividends of companies is a great way of generating income and stability of business in the future. Profits are possible in two ways:
• stock price appreciation
• Payouts made by the company
There are various ways in which it is justified to invest in dividends-
• holding dividends in companies which distribute regular dividends can yield higher profit in future.
• Dividend stocks are less risky than non-dividend stocks
• There is both the benefit of dividend income as well as capital appreciation.